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TMI Blog2023 (2) TMI 693X X X X Extracts X X X X X X X X Extracts X X X X ..... id being passed in violation of the law making the assessment proceedings non est and invalid. Ground No. 2: On the facts and in the circumstances of the case and in law, the Assistant Commissioner of Income Tax- 4, Pune ('the ACIT') erred in passing the final assessment order in the absence of jurisdiction as per the provisions of Section 144B rendering the final assessment order to be null and void. The Appellant prays that the final assessment order is null and void being passed in violation of the law and deserves to be quashed. Ground NO.3: On the facts and in the circumstances of the case, and in law, the Ld. ACIT, pursuant to the directions of the Ld. DRP, erred in making a transfer pricing ('TP') adjustment of INR 75,00,000 to the income of the Appellant, by holding that the Appellant's international transactions pertaining to interest on External Commercial Borrowing ('ECB') is not at arm's length. Further, the Ld. DRP /Ld. ACIT /Ld. TPO while making adjustment on account of interest on ECB Loan erred in: (a) Rejecting the benchmarking analysis conducted by the Appellant (b) Allowing only a marginal spread of 25 basis po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee. However, in the instant case, the A.O instead of draft assessment order has passed the final assessment order and along with it, had issued demand notice u/s 156 of the Act. Therefore, such assessment order is null and void being passed in violation of the law making the assessment proceedings non-est and invalid. The factual matrix of this issue is that the assessee had made a reference to the T.P.O for determining the Arm‟s Length Price (ALP) of the international transactions. The T.P.O passed the order u/s 92CA(3) of the Act dated 29-07-2021 making an adjustment of Rs. 3,04,70,548/- on account of international transactions pertaining to interest on ECB. Subsequently, the A.O had issued a draft assessment order dated 29-01-2021. It is the assessee‟s contention that the A.O had issued the final assessment order as he had mentioned the words "assessment order" on the first page of the draft assessment order. Also it is the contention of the assessee that the demand notice was issued and penalty proceedings u/s 270A of the Act were initiated. Therefore, the A.O has given finality to the assessment and the draft assessment order issued by the A.O is not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oss returned which is prejudicial to the interest of such assessee.‟ Subsection (2) of section 144C states that the assessee shall either file his acceptance to the AO on the variations proposed in the draft order or file his objections, if any, with the ld. DRP. In case, the assessee accepts the variation in the draft order or no objections are received within 30 days, then sub-section (3) states that: `The Assessing Officer shall complete the assessment on the basis of the draft order‟. In case, the assessee does not agree with the draft order, it can, inter alia, raise objections before the DRP, which shall issue directions under sub-section (5) of section 144C. Upon receipt of the directions from the DRP, the AO completes the assessment under sub-section (13) in conformity with the directions given by the ld. DRP. 11. An overview of section 144C of the Act deciphers that a draft order passed under sub-section (1) is only a tentative order which does not fasten any tax liability on the assessee. In case variations to the income in the draft order are accepted by the assessee or no objections are received within 30 days, the AO completes the assessment under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e above precedents, it is manifested that the assessment proceedings come to an end on the issue of notice of demand u/s 156 of the Act. Once a notice of demand is issued, the AO becomes functus officio in so far as the completion of assessment is concerned. It consequently follows that issue of notice of demand marks the completion of the assessment. 13. Reverting to the facts of the present case, it is observed that the A.O had issued notice of demand on 29-06-2021 which is the same date on which the alleged final assessment order was passed. Statutorily it was incumbent upon the A.O to pass the final assessment order after the draft assessment order and then issue notice of demand. Issuance of notice of demand brings finality on the process of assessment. Before the notice of demand is issued one cannot say that the assessment has concluded. 14. The Hon'ble Madras High Court in Vijay Television (P) Ltd. Vs. DRP (2014) 369 ITR 113 (Mad.) was confronted with a situation in which the AO, pursuant to the order of the TPO, passed a final assessment order instead of a draft order. A question arose as to whether the order so passed could be treated as a valid order. Accepting the con ..... X X X X Extracts X X X X X X X X Extracts X X X X
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